How To Get A Business Loan in South Africa

How To Get A Business Loan in South Africa

For most business owners, getting a business loan in South Africa can be a frustrating process. Many approach their banks directly and still get rejected after a long, drawn-out process, despite showing growth and great future prospects. Sometimes it feels like funding businesses is an impossible task but don’t give up yet, there are ways to secure pollen finance to expand your business!

What Do You Need From Your Business Loan?

Many SMME’s get rejected when applying for business funding because they are applying for the wrong type of loan! First figure out when you need the cash? Do you need it right now or in a few weeks or months down the line? If you’re waiting for a big invoice to be paid you’ll be able to pay back your loan in a matter of days. If you need the cash because your business is seasonal, you’ll need a very different type of loan.

Then ask yourself why you need the cash? What are you using it for? Here is a table with some common SMME expenses that owners seek out loans to cover…

When applying for business finance, make sure the institution you are applying to offer the type of business loan you are looking for.

How To Qualify For A Business Loan 

  • Credit Score

If your business is in good credit, you’ll have a much easier time securing a business loan. If you have a large debtors book, big overheads and unpaid bills, lenders are going to be a lot more nervous loaning your business money.

  • Collateral

If you own equipment, machinery, vehicles or your building, these can be considered collateral. They are assets the lender can claim if you default on your business loan repayments.

  • Years in Operation

The longer you’ve been operating and the more financial records you’ve got, the better your chances of getting a business loan approved.

  • Annual Revenue

Some lenders have minimum requirements in terms of annual turnover and their various loan products. Check this carefully before applying.

Is It Hard To Get A Business Loan?

Through traditional means, yes! It can feel near impossible! It is easy to get an unsecured business loan with New Heights Finance. We have simplified the process to widen access to business loans for SMME’s.

We offer unsecured business loans to businesses older than 6 months with a turnover of at least R1 million in the last 12 months. Read more about what we can offer you here and we invite you to start the application process with us now.

Beat Lockdown Financial Blues with Unsecured Business Loans

Is your business taking strain under our extended lockdown? Bills mounting up, COVID 19 UIF not paying out, creditors calling for their money and clients not paying? Does that sound familiar? Rest assured, there is help at hand. A new business funding mechanism is available to businesses that have been operating for longer than 12 months and have a good credit record. These are called Unsecured Business Loans.

Requirements for An Unsecured Business Loan

  • All that you need to provide is 6 months bank statements for the initial assessment. No need for audited financial statements, debts and creditors profiles, assets registers and other complicated documents. You’ve got enough on your plate already, we try to make the loan application process one less thing to stress about.
  • Private Lenders
    These Business Funds are offer by private lenders. These companies are easy to deal with and
    respond quick because they are keen to lend money to business. The reason for this is that they
    make money when they lend money. While the money is in their bank accounts it is not making
    them money, therefore they are eager to assist you with your business loan requirements.
  • Loan Sizes
    The minimum loan amount is R50 000 and the maximum R1,5 Million. The amount a company
    is legible for is dependent on the company turnover and how regularly the income comes into
    the business.
  • Timeframe
    Due to the simple and streamlined process the loan approval can be within 3 days, but approval time is always subject to the applicant providing the information the lender needs timorously.
  • Repayment
    Repayment of business finance loans like these are made over a 6 month term. The repayment
    is calculated by adding the loan plus interest together and then divided by 26 weeks. Repayment is by weekly debit order for a period of 26 weeks.
  • Refinance
    If a borrower has repaid the unsecured business loan on time for 13 weeks, then they are entitled to apply for a further business cash advance. The lender will reassess the business and make a decision on whether to advance further business funding.

Typical Applicant Profile
The lenders want to advance cash to businesses that have strong and regular cash flow. Businesses with daily or weekly cash in-flows are good candidates for a business loan approval. Typical strong, regular cash flow businesses are Filling Stations, Supermarkets, Butcheries and Hairdressers.

No Security Necessary!
A big advantage of unsecured business loans is that the borrower does not have to provide any security. Banks and other secured lenders want property, debtors and even plant and equipment as security for their loans. But in our harsh economic circumstances this model is not always possible which is where unsecured business loans come in to assist you to improve cash flow in your business right away.

Default on Loan
As with any type of lending, if the borrower defaults on the repayment, the lender is entitled to take legal action to recover their money. This can lead to the company and its members being listed at the credit bureaus and this has a negative effect on any business. It is best to not borrow money, if there is a likelihood of not being able to pay the loan back.

Unsecured business loans are suitable for businesses that have positive and regular cash flow. They are not the cheapest form of business loan but they are quick (3 days to approval), no security is needed and they suit businesses that are in need of a Short Term Bridging loan.